Friday, October 30, 2009

CA Nonprofit Law Changes - AB 404 - Exemption Application and Determination by FTB

The Governor also recently signed AB 404, which is another a bill affecting nonprofit organizations. Click here for the text of the bill.:

The purpose of AB 404 was to clarify the process for applying for tax exemption as a charitable organization under Revenue and Taxation Code Section 23701d using the streamlined Form 3500A that was introduced by the FTB two years ago. AB 404 amends the Code so that:

  • An organization, including a subordinate organization under a group ruling, can receive the exemption upon submission of a copy of the relevant IRS determination letter or ruling recognizing the organization's exemption from federal income tax as an Internal Revenue Code (IRC) Section 501(c)(3) Organization;
  • The effective date of an organization's exemption from state income tax shall be no later than the effective date of the organization's recognition of exemption from federal income tax;
  • If the FTB suspends or revokes an organization's exemption, the exemption shall only be reinstated upon a more detailed determination by FTB, regardless of whether the organization can establish exemption under the Form 3500A process; and
  • Documents submitted to the Franchise Tax Board to verify the exemption, and the acknowledgment letter or other document issued by the Franchise Tax Board, are required to be made open to public inspection.

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